THE dollar is one US cent lower on further worries over Irish sovereign debt and Asian inflation.
The local unit fell below the 98.00 US-cent mark overnight for the first time since October.
At 7.00am (AEDT), the dollar was trading at 97.64 US cents, down from yesterday's close of 98.55 cents.
Since 5.00pm (AEDT) yesterday, the local unit traded between 97.25 US cents and 98.47 US cents.
European nations are worried that the tension over Ireland's sovereign debt is making borrowing more expensive for countries such as Portugal and Spain, threatening to push them to the brink of default.
Also overnight, the Korean central bank raised its interest rate for the second time in four months and the governor of the Chinese central bank voiced concerns about his nation's rising inflation.
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Bank of New Zealand currency strategist Mike Jones said said these two factors sent financial markets into a tailspin.
"There was actually a double whammy from worries about Asian inflation in the first instance and European sovereign solvency," Mr Jones said.
"Equity markets around the world dived two and three per cent and risk aversion surged higher," he said from Wellington.
"Against that backdrop, we saw increase demand for safe haven currencies of the the US dollar and the yen and that came at the expense of currencies like the Australian dollar.
"There were also quite sharp falls in commodity prices with also weighed on the Australian dollar.
Mr Jones said the dollar's outlook for the rest of the week was dependant on news about European sovereign debt.
"For the moment, all eyes are on Europe and whether we get a resolution on the Irish sovereign debt crisis.
"We are seeing economic data and other sectors take a back seat," he said.
Dollar flat amid Euro fearsStocks retreat; Dow off by 37
